Sixth Circuit Decision in Pulte Homes Leaves Employers With Few Options In Response To Union High Tech Tactics

A Sixth Circuit decision issued on August 2, 2011, puts the spotlight on union high tech tactics in the midst of an organizing campaign and potentially puts employers in precarious positions in attempting to respond.

In September 2009, Pulte Homes, Inc. fired a construction crew member for misconduct and poor performance. Claiming that the crew member really was terminated for wearing a pro-union t-shirt, the Laborers’ International Union of North America (LIUNA) filed an unfair labor charge with the NLRB and unleashed a denial of service campaign that paralyzed Pulte’s phone and email systems.

Four days after the campaign started, Pulte’s general counsel sent the union a cease and desist letter in an effort to put a halt to the disruption, but the calls and emails continued. Pulte then filed a federal lawsuit against LIUNA alleging several state-law torts and violations of the Computer Fraud and Abuse Act ("CFAA"). At the same time, Pulte moved for a preliminary injunction to enjoin the email and phone campaign. A district court judge declined to issue a preliminary injunction, contending that it lacked jurisdiction to enjoin a lawsuit arising out of a labor dispute under the Norris-LaGuardia Act ("NLGA"). Pulte appealed.

In a mixed-bag decision, the Sixth Circuit found that the district court improperly dismissed one of Pulte’s two claims under the CFAA. Specifically, the court held that Pulte’s complaint adequately pleaded a claim under the CFAA by alleging that the union had knowingly caused the "transmission of a program, information, code or command, and as result of such conduct, intentionally cause[d} damage without authorization" to its computer systems. The court, however, concluded that Pulte’s complaint failed to state a cause of action under another portion of the CFAA which required proof that the union had accessed Pulte’s computer system either without authorization or by exceeding its authorization. Because the union merely contacted Pulte’s phone and email system like any other member of the general public could, the court concluded that the union did not violate this provision of the CFAA.

But, Pulte’s partial victory on its CFAA claim might be a hollow one because the court upheld the district court’s denial of the preliminary injunction. Specifically, the Court held that by filing suit so quickly after the denial of service campaign began, Pulte failed to comply with Section 8 of the NLGA, which prohibits a court from granting an injunction "to any complainant who has failed to make every reasonable effort to settle [a labor] dispute …by negotiation." The court concluded that Pulte did little or nothing to attempt to settle its dispute with LIUNA. Instead of defending the reasonableness of its settlement efforts, Pulte attempted to avoid this procedural requirement under the NLGA by arguing that many of the phone calls and emails contained threats of violence and destruction of property. But the court concluded that LIUNA’s members merely committed "nonviolent, albeit harassing, business disruption."

The Sixth Circuit’s refusal to overturn the district court’s denial of the preliminary injunction is disconcerting under the circumstances. How long was the employer supposed to "negotiate" while the union was preventing it from doing any business by clogging its phone and email systems? The court’s decision does not disclose how long the business disruption continued after Pulte sought injunctive relief in September 2009, but it is now almost two years later. While the court’s decision overturning the dismissal of a portion of Pulte’s CFAA claim gives it the potential for some damages in the future, that possibility conceivably could come too late in many cases. The lesson for employers faced with this kind of union attack seems to be that employers must make some offer to negotiate with the union prior to filing for the injunctive relief when its dispute with the union "arises out of a labor dispute." With unions demonstrating their willingness to use technology and particularly social media to attempt to leverage its position in organizing and bargaining, employers also need to plan and prepare for how it might respond to these kinds of tactics. It is only a matter of time before this issue arises again.

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